In a decision that may undermine the validity of a relatively common method used by employers to require the arbitration of employment disputes, a U.S. District Court judge recently decided that a company’s dispute resolution policy, which appeared only in its employee handbook, was not enforceable. The arbitration provision, the court ruled, was not part of a contractual bargain between employee and employer. As a result and despite strong support in case law for the enforcement of employment-related arbitration agreements, a motion to compel arbitration was denied.
The case involved an employee’s claim that her employer interfered with her maternity leave rights under the Family and Medical Leave Act (FMLA). The employee alleged in a U.S. District Court lawsuit that she was passed over a promotion and demoted to a part-time position in retaliation for asserting her rights. Citing a provision in its employee handbook — for which the employee had signed a standard receipt and acknowledgement form, which commonly appears at the end of employment manuals — the employer moved to compel arbitration. The court denied the motion, citing the facts that the manual was not negotiated by the parties and the employer reserved a unilateral right to modify its policies.
The case, Domenichetti v. The Salter School, LLC, was decided April 19, 2013. While it points up the need for employers to take care when drafting arbitration clauses, it should not undermine their general enforceability. As long as the agreements are clear, reasonable and the product of a bargained-for agreement, they will generally be enforced in Massachusetts and may even be applied to alter normal procedural rules that may apply in employment cases. (See Feb. 29, 2012 Post on this site.) Arbitration agreements are viewed favorably by many employers, which see them as a faster, less exepensive, and less risky way to resolve disputes.